Marc Faber Sees Stock Market Correction, Fiscal Debt Crisis (Bloomberg Interviews)

Here are more interviews with Dr. Evil, Dr. Doom Marc Faber on Bloomberg Television. He thinks there will be a rebound in the US Dollar and a correction in stocks and gold. So that is where Doc Doom stands in the short term. Bloomberg video link. Here is the underlying article: Marc Faber Says Stocks Have Likely Peaked for 2009 (Bloomberg).


Here's a three part interview from September 22, 2009. "The next crisis will bring down the entire capitalistic system". Fast forward to 5:43.






S&P and Oil Performance Gap, Will SPX Follow Oil Lower? (Charts)

First off how about those DEC Crude Oil $60 Puts! I wrote about crude's inflection point two days ago. Oil broke down and premium spiked on the $60 Dec put, which is up 117% since that post (1.09 to 2.37). For those who speculated or hedged with puts, congrats. $WTIC spot (W.Texas Crude Oil) declined 8.18%. It broke the 50 day moving average and could test $60 support eventually. The 200 day moving average is at 56.56. Traders could retest the 50dma (now resistance) first, we'll see.

West Texas Crude Oil (Courtesy of Stockcharts.com)


The market is starting to roll over with Crude. During the past month W. Texas crude ($WTIC) declined 8.5% while the S&P gained 2.2%. Since oil and economic growth are directly related the 10.7% performance gap should, in my opinion, get filled sooner or later. Will the market take oil's lead here or could this possibly be a fake dollar denominated sell off.

Fed FOMC Statement, Scales Back TAF, TSLF (9/23-9/24)

The Fed plans to "gradually scale back facilities in response to continued improvements in financial market conditions". Let the unwind begin?

Source: FederalReserve.gov
Release Date: September 23, 2009
For immediate release

Information received since the Federal Open Market Committee met in August suggests that economic activity has picked up following its severe downturn. Conditions in financial markets have improved further, and activity in the housing sector has increased. Household spending seems to be stabilizing, but remains constrained by ongoing job losses, sluggish income growth, lower housing wealth, and tight credit. Businesses are still cutting back on fixed investment and staffing, though at a slower pace; they continue to make progress in bringing inventory stocks into better alignment with sales. Although economic activity is likely to remain weak for a time, the Committee anticipates that policy actions to stabilize financial markets and institutions, fiscal and monetary stimulus, and market forces will support a strengthening of economic growth and a gradual return to higher levels of resource utilization in a context of price stability.

With substantial resource slack likely to continue to dampen cost pressures and with longer-term inflation expectations stable, the Committee expects that inflation will remain subdued for some time.

In these circumstances, the Federal Reserve will continue to employ a wide range of tools to promote economic recovery and to preserve price stability. The Committee will maintain the target range for the federal funds rate at 0 to 1/4 percent and continues to anticipate that economic conditions are likely to warrant exceptionally low levels of the federal funds rate for an extended period. To provide support to mortgage lending and housing markets and to improve overall conditions in private credit markets, the Federal Reserve will purchase a total of $1.25 trillion of agency mortgage-backed securities and up to $200 billion of agency debt. The Committee will gradually slow the pace of these purchases in order to promote a smooth transition in markets and anticipates that they will be executed by the end of the first quarter of 2010. As previously announced, the Federal Reserve’s purchases of $300 billion of Treasury securities will be completed by the end of October 2009. The Committee will continue to evaluate the timing and overall amounts of its purchases of securities in light of the evolving economic outlook and conditions in financial markets. The Federal Reserve is monitoring the size and composition of its balance sheet and will make adjustments to its credit and liquidity programs as warranted.

Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; Elizabeth A. Duke; Charles L. Evans; Donald L. Kohn; Jeffrey M. Lacker; Dennis P. Lockhart; Daniel K. Tarullo; Kevin M. Warsh; and Janet L. Yellen.


---------


Source: FederalReserve.gov
Release Date: September 24, 2009
For release at 10:00 a.m. EDT

The Federal Reserve on Thursday announced schedules for operations under the Term Auction Facility (TAF) and the Term Securities Lending Facility (TSLF) through January 2010 and other information related to those facilities.

These schedules are consistent with the intention indicated in the Federal Reserve's June 25 press release to gradually scale back these facilities in response to continued improvements in financial market conditions.

The schedules also take account of the possibility that market pressures could be heightened over year-end. As noted in previous announcements, the Federal Reserve remains prepared to expand its liquidity operations more generally should financial market conditions deteriorate materially.

Schedules are attached.

Term Auction Facility


Under the TAF facility, to date the Federal Reserve has reduced offered amounts from a peak of $150 billion per auction to $75 billion per auction as conditions in short-term funding markets have continued to improve. Under the schedules announced Thursday, the Federal Reserve will continue to offer $75 billion per 28-day auction through January in order to ensure that an adequate volume of funding is available in the period leading up to year-end and over year-end. Reductions in the sizes of those 28-day operations are expected to resume early next year. The amounts offered under the existing cycle of auctions of 84-day funds will be reduced to $50 billion effective in October and to $25 billion in November and December, and the maturities of those operations will be reduced. The purpose of shortening the maturities is to align the maturity dates of those operations with the maturities in the cycle for 28-day funds. With the completion of that transition, the auction schedule will be converted by early next year to a single cycle of 28-day funds offered every 28 days.

Over the next several months, the Federal Reserve will assess whether to maintain a TAF on a permanent basis and will publish a request for public comment on a range of possible structures for a permanent TAF.

Term Securities Lending Facility

As announced on June 25, the Federal Reserve has discontinued Schedule 1 TSLF operations and TSLF Options Program operations. It has also reduced the frequency and size of its Schedule 2 TSLF operations. Consistent with recent further improvements in conditions in secured financing markets, the amounts offered in TSLF auctions will be scaled back further from their current size of $75 billion. As indicated in the attached schedule, TSLF offerings will be reduced to $50 billion in the October auction and to $25 billion in the November, December, and January auctions in the current 28-day cycle of auctions.

Peter Schiff Expects Dow/Gold Ratio to Equal 1!

Peter Schiff was on Tech Ticker today.. He thinks the Dow/Gold ratio could equal 1 and he sees Gold at 5,000/oz! The ratio is currently trading at 9.77/1. Below I provided a chart.






Dow:Gold Ratio (Courtesty of Stockcharts.com)

Marc Faber is Bearish on Dollar, Prefers Gold and Stocks With Inverse Correlation

Marc Faber is not bullish on the Western world compared to emerging economies. There will be negative consequences as a result of the Fed printing money and the $2 trillion fiscal deficit. Faber is highly confident there will be an economic collapse after this reflationary boom. He believes the standard of living will decline due to inflation and Governments will go to war to divert attention away from the public. Damn... But he's basically saying ride the reflation wave until all hell breaks loose.


Source: Yahoo Tech Ticker

It's interesting that he switched his view on the Dollar. On August 15 Faber thought the US Dollar would rally for a few months with a market correction. It could still pan out. He did acknowledge the risk of the "Fed being a money printer". From this interview on 9/24 he said just that, before the economic collapse the S&P/US Dollar pair trade will move higher given the inverse correlation. He said you can protect yourself from dollar depreciation by buying real assets (commodities). As for stocks he likes Chesapeake Energy to take advantage of an eventual rebound in natural gas prices and Nova Gold.



I'm stocking up on Macbook Pros, Verizon internet cards, canned food, farm land and a glock.

Oil Put Options, MACD, RSI, Implied Volatilities, OVX Update

Watch oil here..

"Oil Options Hit Highs as Verleger Predicts 44% Plunge (Update3)

By Alexander Kwiatkowski and Grant Smith

Sept. 21 (Bloomberg) -- Oil traders are paying more than ever in the options market to protect against a plunge in crude prices.

The gap between prices of options betting on a decline and those that would profit from a rise in oil widened to a record 10 percentage points, according to five years of data compiled by Banc of America Securities-Merrill Lynch. Crude stockpiles in the U.S. are 14 percent larger than a year ago and OPEC is pumping 600,000 barrels a day more than the world needs, according to the International Energy Agency."

"“There’s all this heating oil with no place to go,” Philip Verleger, a professor at the University of Calgary and head of consultant PKVerleger LLC, said in a phone interview. “I’m fairly certain we’ll see prices in the $30s this year.”"

"While Verleger has dropped a forecast made in July that oil would sink to $20 a barrel, traders are anticipating a decline. The Nymex’s most popular option is the right to sell December crude at $60 a barrel, with 69,244 contracts outstanding, exchange data show. The right to sell at $50 a barrel is the second most widely held. The December 60 put option rose today 47 percent to $1.66."
(Full Bloomberg article)


Today the December $60 put closed at $1.09 with 67,502 open. Premium was pulled down since that Bloomberg article. For recent views on oil put/call implied volatility visit these blogs.

Oil Put Demand, That Is (Daily Options Report)
Volatility Skew in Crude Oil Options (Don Fishback)
Bloomberg Option Blooper (Sigma Options)

Crude ($WTIC) looks like it's trading in an ascending triangle which is bullish however it must break above $75 with conviction. A break below $69 would create a lower reaction low and be bearish for crude (with volume). Technical indicators are forming a symmetrical triangle around critical levels. For example the MACD (Moving Average Convergence Divergence) and RSI (Relative Strength Index) are at the 0 and 50 level respectively. A run above or below those levels will decide the direction of strength and momentum. Oil has been riding the 50 day moving average higher and must break below that level (69.50) to prove it can move lower.


$WTIC Chart Courtesy of Stockcharts.com


Another interesting chart is the Oil Volatility Index ($OVX) which is hitting 40 lows for the fourth time. The OVX has been in the 40-50 range since May with oil trading between 63-75.


OVX Courtesy of Stockcharts.com

Will the reflation trade (commodities, S&P, levered loans, risk) just pause and refresh or will it shake out longs at some point? But with what the Government is doing how could they ever be nervous? Crude oil inventories are still up year over year. Read the DOE report ending 9/11. Inventory data is set to be released today. The American Petroleum Institute showed a rise in inventories on 9/18. Oil Falls After Industry Report Shows Increase in Fuel Supplies (Bloomberg). Stay tuned..

ARBX Financial Trends Plus a Volume Spike (Hitting Switches at Arbinet)

I saw a volume spike in Arbinet Corp (ARBX). Over 200,000 shares traded, a number not seen since April.


ARBX 4 Month Chart


DV analyzed Arbinet's financials on April 3 and here is an update. Quarter over quarter revenue and equity declines are leveling off and operating and cost improvements, along with a forex gain, helped out operating and net income this quarter. The operating and net income lines increased every quarter since 12/31/08 but they are still clocking losses. Net income is almost in the black at -967k. The charts below of total revenues, operating income, net income and equity use financial data from Yahoo Finance. Also price/sales(ttm)=0.14 and price/book(mrq)=1.14.

Restaurant Delevering Continues, Tishman On CRE (Video)

Restaurant sector continues to delever and reorganize it's balance sheet.



Roseville developer shuts his T.G.I. Friday's restaurants (Sacbee.com)

Owner of 70 Jack in the Box restaurants seeks bankruptcy protection (MercuryNews.com)

Alizadeh's Jack in the Box franchise forced to seek Chapter 11 (Rosevillept.com)

Tavern on the Green Files for Chapter 11 (New York Times)

Bankruptcy Takes A Bite Out Of The Big Apple (WSJ Blogs)

Tishman, CEO of the Tishman Construction Corporation, discusses the commercial real estate industry on CNBC. Commercial Real Estate Is Next Bubble to Burst: Tischman (CNBC).






More News On CRE:

Moody's: Commercial real estate prices falling (AP)

Investors Expect Bank Woes May Finally Jump-Start Distressed Buying Opportunities (CoStar)

BMO's Adornato on CRE, Capitalized REITs and Distressed Buys (Interview Aug 24)

LeFrak, Bair: Commercial Real Estate Loan Losses On Small Banks 2010 (Interviews)

$UUP Back In Early 2008 Channel (Charts, Call Option Interest)

Here are recent UUP (US Dollar Bullish ETF) charts (2 year, 6 months, 2 months, 6 weeks). It is trading at 22.76. First off, looking at the 2 year chart UUP is back in the early 2008 channel (21.92-23.07). UUP has been trending lower since April and volume recently picked up in the ETF and it's call options. $UUP could retest the downtrend to fill that 23.14 gap but requires a strong catalyst to break above that trend. Below is open interest that stood out in the October, December and March 2010 options. Wondering if there's an ounce of speculation in the calls. UUP volume is hitting levels not seen since September 2008, right after Lehman went under. Right now there is a lot of pressure on the USD, from carry trades (1, 2) to shorts betting against USD dilution. However it is interesting that UUP short interest ending on 9/1 was down 52% from 1.53 million shares short to .72 million. Watch the daily updated $UUP chart below to scope out a potential trade on an upside trend break, or watch it die. Mo' Money, Mo' Problems Bernanke!!

October $23 Call, 14,879 open at 0.25
October $24 Call, 19,563 open at 0.10
October $24 Put, 2,713 open at 0.50

December $23 Call, 32,623 open at 0.45
December $24 Call, 24,127 open at 0.30
December $25 Call, 12,055 open at 0.15
December $23 Put, 3,418 open at 0.80
December $24 Put, 3,278 open at 1.52
December $25 Put, 1,030 open at 2.30

March $24 Call, 6,628 open at 0.55
March $24 Call, 32,029 open at 0.30
March $24 Put, 2,423 open at 1.75